“We feel like this market still has some room to move higher,” said Burt White, chief investment officer at LPL Financial in Boston, which oversees $259 billion. “We’re still at levels that are lower than we were before Lehman Brothers. We are vastly better off than we were then.”

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

29 Responses to “Are We “Vastly Better Off Than We Were” Pre-Lehman?”

Burt is likely way better off, particularly if he bought in vicinity of the low in March.

He ought to be drinking Petrus with his pastrami.

Isn’t so much of life viewed from a purely personal perspective? Talking his book can only make his clients feel great, possibly move it higher, and, if he has some great inside tips as to when the fall is coming, shorting some indexes along the way.

Life is good.

I doubt he has much concern for the data points you list. A triple in 5 months can go along way to assuage feelings for others who were decimated.

i’m sure “WE” refers to other than the millions of unemployed, foreclosed upon, hungry, depressed, cold and homeless among us – the great unnoticed horde – which may have had a few bankers and traders in its mix since Lehman.

“…I know I have presented the above chart many times, but it will continue to be presented until people wake up and smell the damn coffee! It is the policies of The Federal Reserve that have led to this mathematically-impossible circumstance.

Secrecy breeds complicity and fraud, and nowhere is that more evident than at The Fed. The NY Fed, for example, did funnel a huge amount of taxpayer money through AIG to foreign and domestic banks after, in secret, making known that it and Treasury would not allow AIG to fail, thereby destroying their negotiating position. It was through secrecy that this was able to happen without the public raising a well-justified amount of hell at the time and now we are stuck with the consequences.

The FDIC has taken a page out of The Fed’s “bamboozle ‘em by keeping ‘em in the dark” playbook, refusing to act to close banks until they are 20, 30, 40, even 50% underwater on asset prices. How does this happen? How do “bank examiners” not know that these “assets” are worth far less (or just plain worthless) than their book value? There are only two possible explanations – willful blindness or outright idiocy.
Neither is acceptable.
Then there’s this – apparent FDIC refusal to disclose REO auction results! It seems to me that a well-placed FOIA is in order, but is one really necessary? The fact of the matter is that underlying asset prices are still collapsing in the real economy, as the ability to take on more debt to support the bubblelicious values of yesteryear simply does not exist. The FDIC’s refusal to disclose is a raw attempt to prevent the market from realizing the truth – these so-called “assets” are deeply impaired (at best) and there are literally hundreds of banks and other institutions (including most especially The Fed!) that have securities “backed by” these assets that are worth far less than their alleged “face” value.

Recognition of this will set off another leg down in this crisis and the regulators and Washington DC folks know it. They have spent over two years playing “extend and pretend” in the futile belief that valuations would recover by now – but they haven’t. It is in fact mathematically impossible for them to do so as the net debt carrying capacity of the private sector has been exceeded.
There are about $10 trillion worth of mortgages outstanding in this country (according to The Fed Z1); of that well over half is linked to Fannie and Freddie. The actual underlying value of the homes linked to that debt was overinflated by roughly half during the years 2001-2007.
Deutche Bank has estimated that more than half of all homes with mortgages will be “underwater” by the end of next year. Hiding the reality of this calamity has become the mantra of the government and its agencies at this point – there is literally more than $1 trillion, and perhaps as much as $2 trillion, in additional residential real estate losses that are being hidden in the system right here and now, and The Government, either directly or via The Fed, is on the hook for the majority of it.

My mortage, when I had one, was underwater for ten years after I bought my house. SO what?

I don’t see that as a threat to anything, unless people are buying houses strictly to resell them in which case their houses should be subject to market conditions just like anything else they buy, i.e their cars, furniture, etc.

However, your other points about secrecy and hiding the true value of current assets is more to the point.

Even they are subject to a ‘time machine’. Held long enough everything will appreciate. There is long money in this world that looks out generations ahead and cares not one iota about the current crises.

When I was a kid, as a family we used to drive down to Florida and other States and stay in a motel here and there. By the time we got to Virginia, we’d invariably get asked if we lived in igloos.

Fast forward to the 90s. I’m an analyst and the whole world is in awe of the US, kings of the world. I’m in my 20s and all my superiors, who’ve never stayed in less than a 5-star hotel are trying to explain to me how Americans are so much more productive than us Canadians…

Most of those making importatn decisions have no empathy and even if they did have any capacity for it, they would not have enough facts and real life experiences to properly understand.

The only question I have in your list Barry is the govt deficit tripling.

The more I’ve learned lately about govt deficits and what they are measuring the less I’m concerned about them.
In fact I think in many ways its a totally worthless number. Worthless in the respect that we should NOT think about it as something we need to “pay back” or something that is going to “burden” our grandchildren.

What is your feeling on this? Modern Monetary Theory is quite clear about what a deficit is and is not. I really think we have too emotional a reaction to the word “deficit” as if something is missing which needs to be filled at some point. It is simply an accounting reflection of the amount of private sector saving. The more the private sector wishes to save (and aggregate demand falls……leading to unemployment) the govt sector “funds” their saving by filling the demand drop in an attempt to keep demand constant and unemployment low. This funding of the private sectors savings desire IS the deficit.

With a deficit that tripled. 12% of our reduced GDP is federal debt financed. Image how bad times would be without that subsidy. We will have hell to pay when the global economy heats up and we have to pay market interest rates of this accumulated debt. Much of which is in shorter term securities. One forecast is $700 billion a year in interest payments alone. Bigger than our entire oil import bill. As a nation we will be like the guy who maxed out on his credit card and now pays the bank interest costs but gets nothing new in return.

“I don’t see that as a threat to anything, unless people are buying houses strictly to resell them in which case their houses should be subject to market conditions just like anything else they buy, i.e their cars, furniture, etc.”

or god forbid- they wanted to move to take advantage of other job opportunities in other localities/States-

I never could understand those who work in industries that require frequent relocation buying real estate in the first place. The notion that you can buy a house and expect that in 1-3-5 years you will recoup your purchase price or make money is a by-product of a mentality that assets should only increase in price, which is ludicrous.

Mobility automatically implies renting. Otherwise, you must expect to at some point take the hit just like anyone else with an a asset that fluctuates in value year over year. That’s just an unpleasant but rigid economic fact of life.

@MEH

Today’s short end of the T-curve is going to look a hell of lot different in 3-6-9 months out. It is meaningful only in its myopia. Wonder what the rate was 24 months ago?

In fact I think in many ways its a totally worthless number. Worthless in the respect that we should NOT think about it as something we need to “pay back” or something that is going to “burden” our grandchildren
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I agree. The US will lose buying power no matter what decisions are made.

There will be less workers per dependant and that is reality. You can give boomers all the money they want, the same number of workers will be there facing them.

And if the system is not cleaned up and you give them all the money they want, not enough companies will be created and they’ll have too many dollars for the services out there.

So something tells me that it’s not just the next generation that will suffer.

doesn’t negate the fact that folks are “trapped’ in their homes and unable to move because they cannot sell their home without a loss or can only get enough rent to cover part of their mortgage payment-

Thanks for the link Mark but I’m not sure the Austrians have the answers. Here’s why I feel that way.

First off they seem convinced that a return to the gold standard is in order. I may be misrepresenting them but every Austrian I read seems to have some forlornness about the move to a fiat monetary system in the 70s. Well I just cant agree with that thinking. Its too zero sum. It wants to act like there is (or should be) some fixed amount of wealth in the world at any particular time. That when a new economic player comes on board they need to convince some of the current players to give something up. I think that is a fundamental flaw in their thinking. We all need to work for wealth and allow every new player to work for their wealth and not need to ask us to sacrifice something so they can have some. I see that as a fundamental description of the Austrian view. Please correct me if I’m wrong in my characterization.

I agree. The US will lose buying power no matter what decisions are made.
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Are you saying this because we will have less money or there will be fewer things to buy? We can “make” all the “money” we wish. The economic issue is how to distribute steadily vanishing resources. As long as the primary thing people are consuming is renewable or ubiquitous ,no problem. When we are competing for something that is diminishing………big problem. Especially if its necessary and diminishing.

There will be less workers per dependant and that is reality. You can give boomers all the money they want, the same number of workers will be there facing them.
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Workers are not required to “fund” boomers retirement (I assume you are talking about the boomers who stop producing as much). But retirees will have to make serious choices about spending on resources which may be becoming limited. Again the problem is not one of money but simply resource allocation.

And if the system is not cleaned up and you give them all the money they want, not enough companies will be created and they’ll have too many dollars for the services out there.
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Again money is just a grease for the wheels of production/consumption. We have unlimited amounts of it. Companies will be created as long as there are demands for something to be produced /consumed which will probably be for eternity, seeing how our species lives. Having too many dollars for the services out there is better than not having enough….eh?

So something tells me that it’s not just the next generation that will suffer.
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How right you are there. All generations do their own suffering, its part of the human condition. My wish is not to make my grandchildrens life suffer free but to make it coping ready.

Thanks for the quick reply Mark (you must be off too ……raining at your place as well?)

While they may not believe in a zerosum game, I believe its quite clear that it ends up behaving as such in many instances.

Gold standard currency got revalued as well in its time. A fiat currency, by defintion, is not more irresponsible. Its only such when irresponsible people are in charge of it.

We had all kinds of financial problems when we were gold standard as well, and I think it was the “private” finance sector that drove those problems, as it did recently (certainly with help from the govt but who can tell the difference these days. Getting control of the private credit issuers is paramount (in my relatively ill informed view) but that is true no matter what standard we use.

Doesnt your example of $3 or $3000 being irrelevant to the buying power undermine your argument about inflation being the boogey man?

The take home message I get from the “soft currency” people is that we should be less worried about inflation and more concerned with full employment. Most of the arguments against policies to create full employment, using employer of last resort policies if necessary, are that it will be (picture my with my hands clasped together in front of my face right now)…………………..inflationary!! Having people willing to do something, anything, to participate in our market place and not being able to because the “bosses” cant afford to pay them a wage and still make the profit (not that profit is evil) just seems so counter productive. There is much we need done and if we have to run a deficit ( a negative number on the point counting machine) to do so ………SO WHAT!? So some people who are currently trying to take more and more of their money out of the consumption side and live off their interest wont get as much? Well pardon me but………………..boo fucking hoooo!

None of that other stuff matters, Barry; ‘worse off’ from LPL’s stand point is no public reimbursement for private bank losses. Lehman is the reference point cause it was let to sink, as it should have, and ever since TBTF is the order of the day. This allows everyone in the finanial world to breathe a sigh of relief, firm in their knowledge that J6P’s wallet has their back. Dow 14,000!

you should look into the idea of ‘Free Banking’, file it under: Ripley’s, if you must, but one of the major problems is that of a Currency Monopoly–currently, in the U.S., given to a cartel of Private Banks, a.k.a. the FedRes, endorsed by the USGov, via ‘Legal Tender’-Statutes.

your point, re: Fiat Currencies–”A fiat currency, by defintion, is not more irresponsible. Its only such when irresponsible people are in charge of it.– is True to the extent that the users, of such, have a ready means of substitution, away from it, if they so desire..

also, this: “Gold standard currency got revalued as well in its time.”, again, can only happen in a ‘Currency Monopoly’-realm..

past that (‘Free Banking’), but with idea in mind, this: “We had all kinds of financial problems when we were gold standard as well, and I think it was the “private” finance sector that drove those problems”, is, no doubt, True. Though, understand that that had more to do with Fractional-Reserve Banking, and, literally, Fraudulent Bank MGMT(leverage-ratios stretched beyond any conceivable viability/ too much Paper, too little Specie)

I’m afraid we are just gonna have to agree to disagree Mr Hoffer, without being disagreeable.

As soon as you start channeling the framers and how they understood gold and silver you have gone down a path I do not wish to go down. How did they understand combustion (the phlogiston theory I believe)? How did they understand energy? The framers were very bright and incredibly prescient in many of their deliberations but I will not defer to them on the best way to run a monetary system. They had their reasons for setting it up the way they did and it worked then but the 70s showed the limitations of a metallist currency. We should thank Nixon for having the brains and courage to abandon it.

There are other mechanisms to controlling the Cavaliers of Credit (as Marx first called them) and they certainly are a danger.

It seems to me that at its core the difference between the two schools of thought is that the metallists think if you accumulate currency ,at some point it should be “worth” a certain amount of gold and always have value.
The chartalists on the other hand think money is more of a grease to the wheel of commerce and should be used as such. If you try and hoard it, it will rot. Buy stuff with it, keep the stuff and pass it to your kids if you want but trying to simply keep pieces of paper or electronic bits in a savings account will be counter productive.

I personally think money should have an expiration date.

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Ritholtz has been observing capital markets with a critical eye for 20 years. With a background in math & sciences and a law school degree, he is not your typical Wall St. persona. He left Law for Finance, working as a trader, researcher and strategist before graduating to asset managementRead More...

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